Kevin de Leon on Tax Reform

California Excellence Fund: treat state taxes as donations

Senate Leader Kevin de León has put forward a plan to get around the new federal tax law's limitation on the deduction for state and local taxes. "This is legal," de León insisted, and he could be right, right now. But there is plenty of evidence to
suggest that he won't be right for very long.

The plan, now introduced in the state Senate as Senate Bill 227, would create something called the California Excellence Fund within the state's General Fund, and if taxpayers chose to make donations to
that special fund, they would receive a credit against their state income tax liability equal to the amount of their donation.

The state would end up with the same amount of revenue, but the taxpayer would be better off because donations to the
California Excellence Fund would be considered charitable contributions, deductible on federal tax returns. This would get around the new $10,000 limit on the deduction for state taxes.